The rush toward safe-haven assets continues among investors, increasingly unsettled by an uncertain geopolitical climate and the real possibility that the U.S. Federal Reserve (Fed) will cut interest rates by the end of the month. While the labor market on the other side of the Atlantic shows signs of weakness, gold is soaring to new record highs.
In this context of growing instability, the World Gold Council, the industry association representing major gold mining companies, is advancing a truly revolutionary project. Let’s explore what it entails.

Pooled Gold Interests: A World Gold Council Innovation

Despite investors’ clear interest in gold as the ultimate safe haven, the World Gold Council fears that the convenience of cryptocurrencies could overshadow the precious metal. Gold appreciates, yes, but it does not generate yield; for this reason, it remains a static asset for banks.
David Tait, CEO of the World Gold Council, outlined to the Financial Times the benefits of digitized gold. This new format would allow financial product advantages to be applied within the gold market, enabling asset managers worldwide to view the yellow metal with a fresh perspective.
Gold prices reached record levels last week and have doubled over the past three years. Digitizing this safe-haven asset would enable banking institutions to tap into gold to cover margin and collateral requirements, generating returns.
The new digital unit, called Pooled Gold Interests (PGI), would allow banks and investors to buy and sell fractional shares of physical gold held in segregated accounts.
Previous attempts to create gold-backed stablecoins have met limited success: Tether Gold and Pax Gold, the two most prominent gold stablecoins, manage $1.3 billion and $1 billion respectively — a fraction compared to the roughly $400 billion held by gold-backed ETFs.

Digital Gold: How It Works and Why It Could Revolutionize the Market

The London gold market, known as “Loco London,” is the world’s most important hub for physical gold trading, supported by reserves from commercial banks like HSBC and JPMorgan, as well as custody services provided by the Bank of England. In this vast wholesale market, transactions are conducted directly between parties (allocated and unallocated gold), without the involvement of a central counterparty.

Allocated gold refers to physical gold bars stored in vaults and assigned to a specific owner: each bar has a unique serial number, weight, and purity.
The settlement of allocated gold enables the transfer of ownership of specific lots, ensuring ownership of the metal and protection from the credit risk of custodian banks.

Unallocated gold, on the other hand, refers to a credit that the holder has against the institution for a certain quantity of gold. In this case, there are no specific bars, only a contractual right to the precious metal held by the institution. The credit risk of the account holder is offset by greater liquidity afforded by broader markets with relatively simple settlement procedures.

The WGC’s proposal introduces a third type of transaction designed to facilitate trading and the use of gold as collateral in financial markets. The PGI will allow banks and investors to buy and sell fractional ownership of physical gold held in segregated accounts, with major banks and trading firms as co-owners of the underlying gold.
The model will be piloted by a small group of “core participants” who co-own gold in specialized vaults. These core participants issue the PGIs, which represent beneficial interests in the co-ownership of the gold bars.
Once issued, PGIs may be held by core participants or extended to a broader group, who may hold them on their own behalf or distribute them as assets to third-party clients—including banks and institutional investors.
In addition to holding legal title to the bars and issuing PGIs, core participants will be responsible for the joint custody and management of the precious metal.
Whenever bars are added or withdrawn from the system, ownership rights and the number of PGIs in circulation will automatically rebalance.
This enables gold transactions via the transfer of PGIs without the need to physically move the bars.
Physical gold would thus gain liquidity and flexibility, potentially serving as collateral in financial markets. It would also bridge the so-called “opportunity gap” between allocated and unallocated gold—each currently limited by low flexibility and lack of connection to specific bars, respectively.

Opportunities and Risks

Some market participants remain skeptical of the project, as the players in the gold market are well-established and generally risk-averse.
Adrian Ash, Head of Research at the trading platform BullionVault, has questioned whether gold digitization will find practical use. According to his recent statements, gold already represents the best-performing asset class; therefore, PGIs might introduce more problems than solutions. The new digital instrument might not be recognized as valid collateral in all markets or jurisdictions, and regulatory adjustments could take considerable time.
Conversely, if the WGC’s experiment proves successful, the system could become a new cornerstone for gold settlement and management.
The precious metal would be framed not only as a safe haven but also as a functional and liquid asset, utilized to its full potential.

Fonti:

Digital Gold in the Market

A New Perspective on Digital Gold

The New Frontier of Gold Tokens